“Panic” and “chaos” are not what one should undergo in business. Unfortunately, many entrepreneurs are caught off guard more often than necessary when operating their business. In his book “The E-Myth Revisited”, dynamic author Michael Gerber states that a business person ought to work “on” his/her business, rather than “in” his/her business.
Start-ups have a leg-up if they launch and persevere on the “right track.” The appropriate definition of these two words together imply following a proper course of action. The analogy which can be applied to a business well-being is our own personal state of formidable health comprising of a healthy diet, frequent exercise and undergoing an annual physical. The objective is to be proactive, rather than reactive.
Remaining diligent and active as opposed to reactive
Entrepreneurs may be quite well versed with the products and/or services offered, but not necessarily with running their business including a bucket list of daily administrative tasks. Most notably, sales, marketing and finance/accounting undertakings. This is where honest consideration should be given in either bringing in a partner to complement the entrepreneur’s weaknesses or an external adviser and/or mentor to guide him/her. A sounding board should not be dismissed as prohibitive, thus solely for larger organizations. Seeking professional help is an important way to avoid or plan for business challenges.
Moreover, when drafting a business plan as the road-map, include a SWOT (Strengths, Weaknesses, Opportunities & Threats) matrix and “what if” scenarios — which will reveal and prepare one in avoiding the pitfalls of running a business, as well as coping with various challenges which can arise. In addition, consider plotting a business model as a prelude to the business plan. It makes you think through your business plan, which in turn communicates the business model. Both should synchronize. Make certain a short term (less than 12 months), medium term (13-30 month), as well as a long-term plan (30-60 month) have been conceived.
Savvy business people – whether new or seasoned entrepreneurs or CEOs of large corporations possess:
- Insight and foresight;
- Strategies and execution competence;
- Alternative plans with an exit strategy in case situations turn awry;
- The perception to take “calculated” risks rather than dive into the abyss;
- Openness to third party advice;
- Focus and consistency to achieve their goals and objectives;
- The ability to see opportunity before their competition does and act upon it in a timely manner.
Negligence with current enterprises
Growing pains in any organization require a formidable administration to keep the business operating efficiently which includes customer front & center, profitability and more than adequate cash flow. Telltale signs of weak organizations can be traced to inept leadership. The following points highlight the deficiencies:
- Poor customer service – slow or no customer inquiry replies – abysmal handling of sales and service complaints. Service is portrayed as a reward, not a right or benefit.
- No Unique Selling/Value Proposition. Companies need to define and articulate their unique value proposition and deliver on it consistently. Create the platform for sustainable and competitive advantage.
- Operational deficiencies – various ailments and no structure
- Absence of or very little communication amongst staff and management. Divisions aren’t well-coordinated and do not function as a team.
- No transparency. There is hardly any openness from management.
- Unethical practices – short-term selfish objectives in search of market share. Top executives should promote social norms and principles as moral agents.
- Lack of proper execution of decisions and with new products/services.
- Productivity incentives should be implemented to boost results and employee morale. People must be given a reason to work hard and be efficient.
- Creativity is practically non-existent. An absence of innovation and employee empowerment will hurt progress and stifle new ideas.
- No clear vision/strategy – there needs to be a strategic vision that reflects a truly unmet need and has the commitment of a dedicated CEO. That means that there is a well-defined target audience with a distinct value position that is differentiated, meaningful, and deliverable.
- A weak sales force along with an unattractive compensation plan.
- Favoring nepotism and bias – promoting family members over other qualified employees often leads to resentment or, worse, prompts valuable non-family employees to leave the company.
- Poor hiring practices – should hire for attitude and train for skills.
- Slow/delayed decision-making process – too many layers – overwhelming bureaucratic structure.
- High turnover, which leads to poor employee morale, reduced intellectual capital, lower service levels, higher operational costs and decreased productivity.
- Management in a state of denial about their organization’s shortcomings – remaining with the dysfunctional status quo.
- No channel strategy. Some companies focus on building a product, but don’t think through how to get it into the hands of customers. Even if your product is great, unless you can sell directly, you may be dead in the water without strong channel partners.
- The hidden game – corporate politics – power plays by a handful of individuals for their own benefit to the detriment of their colleagues and the company.
- Misrepresentation of brand(s) – too much hype – empty promises – not delivering on expectations – leads to dissatisfied clients who will alienate the brand.
- Weak financial controls – cash flow dilemmas – over leveraged/under-capitalized (high debt-to-capital ratio) – not reinvesting a certain percentage of profits for future growth.
- Absence of sound marketing program(s) and/or brand strategy. A brand is defined by how it behaves, from the products it builds to how it treats its customers, to the suppliers with whom it works.
- Growing too fast and not staying on course as the company grows.
- Lack or very little employee training & development.
- Deficient in control systems – reactive rather than pro-active.
- Lack of continuous improvements or complacent.
The way to solve an organizational problem is to swiftly confront the structural issues with a moral sense of purpose and ethics. It must also have preventive systems in place in anticipation of issues which may arise.
For its clients to receive stellar service, the enterprise must have its house in order. Besides structure and an efficient operation, employees should be trained and empowered to do their jobs efficiently.
Companies that disrespect their employees and shut-out clients get willfully isolated and have a short life span through an erosion of market share and significant loss of revenue. Thus, a company’s goal should place emphasis on serving its people properly and fairly. Higher morale generates higher profits – though occasionally other priorities hinder that objective, for example, self-serving behavior by certain executives.
Operational prevention: Implementation of systems and risk management
To preventing operational problems before they even occur requires anticipating them through operational intelligence. The purpose of risk management is to identify potential problems before they occur. To do so entails early and in-depth risk analysis through the collaboration and involvement of all parties involved in running the business. It’s where brainstorming occurs about potential problems regarding the product(s), service(s), market(s) etc. to search for and foresee issues, as well as create solutions in advance – eluding the element of surprise at some point in time. Risk management is comprised of: 1) Identifying, outlining and analyzing potential risks; 2) A course of action in handling the identified risks, as well as the implementation of risk control/elimination plans when/where necessary.
Business leadership should contemplate allowing constant flexibility to adjust strategy when necessary if the initial one isn’t effective.
There should be continuous checks and balances – especially with regards to internal financial controls through various procedures implemented to reduce errors or possible embezzlement by staff. Trust but verify ought to be the organization’s mantra and actual implementation.
Perhaps you can consider a risk analysis software such as a SAS platform whose practical use offers best practices to help the company establish a risk-aware culture through various enterprise risk models and forecasting. We note examples of aircraft pilots who diligently prepare prior to a flight – or ship captains making their plans prior to voyages at sea.
When all is said and done – avoiding pitfalls
Companies with inept leadership usually fail in the first or second year, but even established companies can stumble badly when they outgrow the capabilities of the founding team. According to statistics, as the latest available numbers from the two U.S. government statistical agencies responsible for providing data about new businesses illustrate, The Census Bureau and the Bureau of Labor Statistics, five years after new establishments were founded (1995, 2000 and 2005 respectively), 50%, 49 and 47 percent of them (correspondingly) were still in operation.
To be a successful and sustaining entrepreneur requires vision, strategy, execution and constant diligence – along with plenty of sacrifice. A new generation of young entrepreneurs think the road is smooth and a fast track to easy wealth. Obstacles and sacrifice are part of the deal. Harnessing opportunity and overcoming challenges on a daily basis to top the competition is constant work. These conditions are true no matter what the sector of business engagement or company size.
Enterprises spanning a wide array of industries, have earned distinction as “well-” or “best-” managed” by demonstrating business excellence through a meticulous and independent process that evaluates their management abilities and practices – by focusing on innovation, continuous training, brainstorming and caring for their employees’ well-being – as well as investing in meeting the needs of their clients.
Well-run companies thrive no matter what and learn from their mistakes – making certain they don’t repeat them. However, never give failures a second thought. There are no dress rehearsals in business either.
Onwards and upwards!